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Author Topic: I just thought of something: DEFLATION!  (Read 2415 times)
nazgulnarsil
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June 03, 2011, 10:11:58 AM
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WE DON'T CARE

can there be a sticky of some sort about stuff like this or at least move all such posts to the econ board where they seem to enjoy the Sisyphean task of explaining the same econ101 points to noobs over and over again?

There might be interesting, subtle, shortcomings to bitcoin.  Deflation isn't one of them.


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Vladimir
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June 03, 2011, 10:15:33 AM
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yep, deflation is not a bug, it's a feature.

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shady financier
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June 03, 2011, 10:21:44 AM
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WE DON'T CARE

can there be a sticky of some sort about stuff like this or at least move all such posts to the econ board where they seem to enjoy the Sisyphean task of explaining the same econ101 points to noobs over and over again?

There might be interesting, subtle, shortcomings to bitcoin.  Deflation isn't one of them.




You say Economics 101, but a disturbingly large number of posters in this forum have only ever read a few Mises articles or watched Alex Jones-type documentaries about how the banks are all run by communo-fascist lizards.

I think it's a shame, there's a lot wrong with the economic system but the first step to an intelligent response is to understand the problem. The outrage one encounters that bankers 'make money out of nothing!!!1!' is frankly embarrassing.

Time!? Time doesn't Exist! It's just... Numbers on a Clock-face!!! Some guy at Casio just Types the numbers into a MaCHiNE!!!1 Angry

fuck sake. Roll Eyes

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nazgulnarsil
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June 03, 2011, 10:22:50 AM
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well you smacked the biggest misean blindspot square on the nose.  not understanding loans and claiming they create money out of thin air.
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June 03, 2011, 11:39:26 AM
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Except that loans really do make money out of thin air.

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June 03, 2011, 11:49:07 AM
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Except that loans really do make money out of thin air.

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June 03, 2011, 12:07:44 PM
 #7

WE DON'T CARE

can there be a sticky of some sort about stuff like this or at least move all such posts to the econ board where they seem to enjoy the Sisyphean task of explaining the same econ101 points to noobs over and over again?

There might be interesting, subtle, shortcomings to bitcoin.  Deflation isn't one of them.




you're exactly right.  and thats assuming Bitcoin is a deflationary currency, which its NOT!

it's a STABLE currency which will in time equilibrate in value (hopefully over a $1000) and then provide extreme and heretofore unknown economic stability for the people of the world.  forget the banksters.
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June 03, 2011, 12:19:39 PM
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The post you're looking for.

http://forum.bitcoin.org/index.php?topic=11627.0

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shady financier
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June 03, 2011, 12:34:50 PM
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Except that loans really do make money out of thin air.

No, loans really do create liabilities of actual wokr/value-creation out of thin air, same place entrepeneurs figuratively speaking get their ideas from (staring up at the big blue sky thinking about new business models).  Basically speaking in business the future does not exist as a reality until we set things down on paper and then work to make it happen.

Banks are limited however in how much money they can 'magic' into existence by how much money they have in their account at the Central Bank. It's called the reserve requirment.

Central banks try to control how much money banks loan out in order to control inflation, they do this either via OMOs or changing the reserve requirements. The issues involved are completely different from the Star Wars struggle your average Mises/gold-bug type likes to babble on about (where the brave Sith men-of-will take on the evil collectivist rebel hordes or whatever).

anyway bottom line is that you may as well shreik at map-makers for drawing an Equator across the Earth that doesn't actually exist. Map-makers and the shady interests that back them might suck for many reasons but the concept of notional lines themselves is not the problem.

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June 03, 2011, 12:40:17 PM
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Banks are limited however in how much money they can 'magic' into existence by how much money they have in their account at the Central Bank. It's called the reserve requirment.


In practice banks apply reserve requirement recursively. Actually, the arrangement fees you pay for getting a mortgage are usually more than enough to cover the reserve requirement.

http://video.google.com/videoplay?docid=5352106773770802849


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shady financier
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June 03, 2011, 01:02:18 PM
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Banks are limited however in how much money they can 'magic' into existence by how much money they have in their account at the Central Bank. It's called the reserve requirment.


In practice banks apply reserve requirement recursively. Actually, the arrangement fees you pay for getting a mortgage are usually more than enough to cover the reserve requirement.

http://video.google.com/videoplay?docid=5352106773770802849



Yes, banks get round central bank attempts to control them by paying pinstripes a lot of money to think up ways of getting round central bank attempts to control them. Banks want to loan out as much interest bearing loans as possible, they're out to make a profit, however creating too much money leads to inflation.

It is better to speak about these kind of issues, the real issues, than it is to waste time listening to people that think it is all a glorious struggle against Sauron and his evil hordes trying to steal the light from Middle Earth. or something.


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June 03, 2011, 01:10:41 PM
 #12

Awww, c'mon. Where's your sense of adventure?

The golden ring to rule them all.

Edit: this short little vid has the best explanation, economically speaking, I thought.
http://www.youtube.com/watch?v=GDcdE9ngx08

danglybits
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June 03, 2011, 02:27:37 PM
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The issue is that creating an IOU 1 gold coin is very different than "I have one gold bar in storage, here is the claim note".

There is nothing magical about "creating IOUs out of thin air", the fraud occurs when the bank issues warehouse notes out of thin air.  The two have VERY different market values.  One depends upon the credit of the loan issuer (ability to repay) and the other depends upon trust of the warehouse not to 'steal'. 

When a bank issues an IOU gold on demand in exchange for an IOU gold in 30 years mortgage they commit fraud unless they actually have claim to physical gold.     Removing physical gold from the process is irrelevant.

The proof of the fraud of the current banking system is that you could *never* implement it with bitcoin.  Sure a bank could issue its own currency that it will 'redeem' in bitcoins, but the value of that currency would float against real bitcoins.    The benefit of bitcoins is that they are 'effecient' enough not to require a bank to hold physical assets and implement 'wire' transfers.
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June 03, 2011, 02:32:06 PM
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The issue is that creating an IOU 1 gold coin is very different than "I have one gold bar in storage, here is the claim note".

There is nothing magical about "creating IOUs out of thin air", the fraud occurs when the bank issues warehouse notes out of thin air.  The two have VERY different market values.  One depends upon the credit of the loan issuer (ability to repay) and the other depends upon trust of the warehouse not to 'steal'. 

When a bank issues an IOU gold on demand in exchange for an IOU gold in 30 years mortgage they commit fraud unless they actually have claim to physical gold.     Removing physical gold from the process is irrelevant.

The proof of the fraud of the current banking system is that you could *never* implement it with bitcoin.  Sure a bank could issue its own currency that it will 'redeem' in bitcoins, but the value of that currency would float against real bitcoins.    The benefit of bitcoins is that they are 'effecient' enough not to require a bank to hold physical assets and implement 'wire' transfers.

Erm... what bank does that? The dollar is not "backed by gold" and niether is the Pound or the Euro. I don't think any currency is backed by gold anymore, world economy outgrew the stuff.

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nazgulnarsil
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June 03, 2011, 02:32:58 PM
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bitcoin doesn't prevent all maturity mismatch.
danglybits
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June 03, 2011, 02:56:26 PM
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Erm... what bank does that? The dollar is not "backed by gold" and niether is the Pound or the Euro. I don't think any currency is backed by gold anymore, world economy outgrew the stuff.

[/quote]

They did not "outgrow" the stuff, they "defaulted" on contractual obligations because they committed fraud by printing receipts for gold that did not exist and giving them to people in exchange for a promise to repay with real "gold" plus interest.

With bitcoins you cannot have an IOU 1 BTC masquerading as a real BTC.  In order to borrow BTC the lender must actually have BTC. 

If I rent a house for 1 year, it would be fraud for me to 'sublease' it for 2 years.  A checking/savings account is like the bank renting a hotel room for one night, knowing that the hotel owner (customers depositing money at the bank) could sell the room to someone else the next day (withdraw on demand).  The Bank commits fraud when it turn sublets the rooms (deposits) for longer than 1 day.

So people are right to be outraged at the current financial system because it is entirely based upon legalized fraud.
 
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June 03, 2011, 03:01:57 PM
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Erm... what bank does that? The dollar is not "backed by gold" and niether is the Pound or the Euro. I don't think any currency is backed by gold anymore, world economy outgrew the stuff.


They did not "outgrow" the stuff, they "defaulted" on contractual obligations because they committed fraud by printing receipts for gold that did not exist and giving them to people in exchange for a promise to repay with real "gold" plus interest.

With bitcoins you cannot have an IOU 1 BTC masquerading as a real BTC.  In order to borrow BTC the lender must actually have BTC.  

If I rent a house for 1 year, it would be fraud for me to 'sublease' it for 2 years.  A checking/savings account is like the bank renting a hotel room for one night, knowing that the hotel owner (customers depositing money at the bank) could sell the room to someone else the next day (withdraw on demand).  The Bank commits fraud when it turn sublets the rooms (deposits) for longer than 1 day.

So people are right to be outraged at the current financial system because it is entirely based upon legalized fraud.
  

I think you have misunderstood banking. Where are you getting your information from?

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nazgulnarsil
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June 03, 2011, 03:05:41 PM
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maturity mismatch is when the bank uses short term assets to cover long term liabilities.  they get away with this because the vast majority of short term assets are rolled over all the time.  it means that many banks only have the illusion of liquidity.

bitcoin doesn't prevent this.
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June 03, 2011, 03:13:26 PM
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maturity mismatch is when the bank uses short term assets to cover long term liabilities.  they get away with this because the vast majority of short term assets are rolled over all the time.  it means that many banks only have the illusion of liquidity.

bitcoin doesn't prevent this.

I agree with this, but I don't think maturity mismatch is what danglybits is talking about.

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June 03, 2011, 03:28:40 PM
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Erm... what bank does that? The dollar is not "backed by gold" and niether is the Pound or the Euro. I don't think any currency is backed by gold anymore, world economy outgrew the stuff.


They did not "outgrow" the stuff, they "defaulted" on contractual obligations because they committed fraud by printing receipts for gold that did not exist and giving them to people in exchange for a promise to repay with real "gold" plus interest.

With bitcoins you cannot have an IOU 1 BTC masquerading as a real BTC.  In order to borrow BTC the lender must actually have BTC. 

If I rent a house for 1 year, it would be fraud for me to 'sublease' it for 2 years.  A checking/savings account is like the bank renting a hotel room for one night, knowing that the hotel owner (customers depositing money at the bank) could sell the room to someone else the next day (withdraw on demand).  The Bank commits fraud when it turn sublets the rooms (deposits) for longer than 1 day.

So people are right to be outraged at the current financial system because it is entirely based upon legalized fraud.

Meh.  I don't subscribe to this view.  Once upon a time it was true, but the world has moved on.  (Except for naked shorts of securities, but you are talking about money.)  I mean, I agree that the world didn't outgrow gold, rather the gold was stolen in a massive fraud.  But that was long ago, and it isn't the problem today.

There is nothing backing the dollar, and there hasn't been anything for 40 years now.  Duration mismatch is a bit of a problem, but not necessarily a big one.  And money really does come out of thin air when a bank lends.  No big deal, that's the system we have, not the end of the world.

But, inflation, as currently practiced, is a tax on everyone that holds dollars (or is paid in dollars, owns obligations denominated in dollars, etc).  If the inflation was evenly distributed, like if every bank account grew by 10% each year, it wouldn't be a problem either.  One amount of dollars is as good as any other amount, just like one amount of bitcoins or gold is as good as any other amount.  But the effect of inflation is not evenly distributed.  It goes to certain players first, and those players get the advantage of free money before the market notices that there are more dollars around and adjusts prices up.

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